System and method for conversion of initial transaction to final transaction

ABSTRACT

The invention comprises a system and method for converting initial financial transactions into final financial transactions entailing lower transaction fees or which are otherwise more advantageous. According to one embodiment of the invention, a card not present (CNP) transaction is conducted for a remote consumer buying goods/services. When the consumer later arrives at a point of authentication (POA), the consumer is presented with an opportunity to have the CNP transaction effectively converted to a card present (CP) transaction using the same card instrument or a different card instrument. The merchant benefits because the transaction fees are much reduced for the CP transaction compared to the CNP transaction. The consumer may benefit from rewards/rebates or other inducements to authorizing the subsequent transaction. One preferred embodiment implements the invention in the airlines environment, wherein tickets ordered over the phone or on-line using a first CNP transaction are converted to a CP transaction when the consumer swipes his/her card at an airport kiosk card reader device.

CROSS-REFERENCE TO RELATED APPLICATIONS

This application is a divisional of U.S. patent application Ser. No.10/975,465 entitled: “System and Method For Conversion of InitialTransaction To Final Transaction,” filed on Oct. 29, 2004 which claimspriority under 35 U.S.C. §119 to Provisional Patent Application No.60/517,402, filed on Nov. 6, 2003, the disclosures of each of which areincorporated by reference herein in their entireties.

FIELD OF THE INVENTION

The present invention relates generally to payment processing, and moreparticularly, to a payment processing system and method providing foreffectively converting an initial type of financial transaction into amore advantageous final type of financial transaction.

BACKGROUND OF THE INVENTION

In the modern “plastic economy,” consumers are using their credit cardsand other card instruments and other payment methods for purchasinggoods and services in place of conventional purchase methods, such ascash and checks. Consumers have determined that the convenience,deferred payment, transaction tracking (e.g., itemized statements), anddispute (e.g., chargebacks) features make such card instruments a muchsuperior payment mechanism. Likewise, corporations provide corporatecredit cards (or other card payment instruments or payment methods) fortravel and other business related purposes.

Merchants benefit from the increased usage of card instruments becausetheir sales volume greatly increases. Consumers tend to make fewerpurchases when cash at hand is required. Checks can be unwieldy for theconsumer and, from the merchant's standpoint, can be less dependablepayment sources. As a result, in the modern economy the vast majority ofmerchants accept card instruments of various types as payment.

As used herein, “card instruments” relates to the various financialaccounts that a consumer can use for paying for goods and services. Inmost, but not all cases, there will be a physical card associated withthe account, although in some instances a virtual card, or no card atall, may be associated with the financial account. Card instrumentsinclude, but are not necessarily limited to, credit cards (e.g.,including general use or private label credit cards), ATM cards, debitcards, check cards, bank cards, stored value cards, and similarproducts. Card instruments may be embodied by conventional thin plastic(or other material) cards having embossings and magnetic stripe data, aswell as so-called “smart cards” or similar devices having processorcomponents and/or readable/writeable memory. Card instruments maycomprise various types of so-called “contactless” cards, such as RFID(radio frequency identification) cards, optically-readable cards orother types of cards or tokens which read without physical contact witha reader device.

One disadvantage to merchants accepting card instruments for payment isthat typically transaction lees must be paid. For example, cardinstruments linked to national interchange networks (e.g., the VISA®interchange, MasterCard® interchange, and the like) impose transactionfees on the merchant each time the card is used. Usually, thetransaction fee (or a component of the total transaction fee) is imposedas a percentage of the money amount being charged to or debited from thecard, although other arrangements such as volume-based transaction feearrangements may be employed.

Card instruments may also be linked to networks other than the nationalinterchange networks. For example, bank cards, ATM cards, debit cards,and check cards may be linked to regional electronic funds transfer(EFT) networks, ATM networks, or similar regional networks. Merchantstend to favor cards which run transactions over such regional networksbecause the transaction fees are generally lower than for the nationalinterchanges.

Card instruments may also be linked to processing networks other thannational interchange networks and regional networks, such as storedvalue networks, private label networks, or other transaction networks. Astored value network may be employed as a dedicated network for runningstored value transactions (e.g., a SuperFood™ stored value card forgrocery shopping). A private label network may be employed for runningtransactions for private label cards (e.g., Hechts™ card or Nordstrom's™card).

In sum, there are a variety of card instrument products that merchantscan accept for payment. Transactions using most card instruments entailtransaction fees that the merchant must pay. With such a large volume ofconsumer transactions involving card instruments these days, this meansthat merchants are paying substantial sums of money in transaction fees.

One type of transaction where merchants are paying substantially highertransaction fees involves what is known as “Card Not Present” (CNP)transactions, sometimes referred to as “non-swipe” transactions. CNPtransactions are submitted when the consumer is not at a point ofauthentication (POA) where the physical card can be presented and readby a reader (or otherwise physically inspected). Typically, CNPtransactions impose significantly higher transaction lees based on a“base rate” component of the transaction fee that increases on the orderof basis points from the base rate component for a conventional “CardPresent” (CP) transaction, where the card is swiped or read or otherwisephysically available.

For example, in 2003 VISA's® base rate component for a CPS Retail CPtransaction was about 1.39% versus 1.80% for a CPS Retail GNPtransaction. MasterCard's® base rate component for a Domestic Merit CPtransaction was 1.40% versus 1.90% for a Domestic MOTO [MOTO—MailOrder/Telephone Order] CNP transaction. Seewww.ose.state.ne.us/EPP/SunTrust.html.

Some transaction interchanges now support CNP-type transactions thathave somewhat improved security over a conventional CNP transaction. Forexample, some interchanges have a transaction type that requires aremote purchaser not only to provide the account number and expirationdate from the front of the card, but also some other information that isnot from the front of the card. For example, there may be digits on theback of the card that the purchaser must provide to the merchant alongwith information from the front of the card. This means that thepurchaser must have information from both the front of the card and theback of the card, presumably meaning that the purchaser has physicalpossession of the card. This can prevent fraudulent MOTO transactionsbased on credit card slips gathered from garbage cans outsiderestaurants, for example.

Such improved CNP-type transactions are still not as secure as a regularCP transaction. For example, a perpetrator of fraud may have a papercopy of the front and back of a credit card, or may have simply writtendown that information on a piece of paper while the cardholder was notminding his/her card. It has also been reported that the security codeon the back of the card can sometimes be fraudulently recreated. Thus,like the conventional CNP transaction, such improved CNP transactionshave the same basic security drawbacks to merchants, issuing banks, andtransaction processors. Because of these security issues, such improvedCNP-type transactions usually impose on the merchant elevatedtransaction fees charged by the interchange processor. The transactionfees for such improved CNP-type transactions tend to be lower than forthe conventional CNP transaction, but they are still higher than forcorresponding CP transactions. Thus, the significant cost and securityissues of these CNP-type transactions remain significant drawbacks formerchants.

In general, the heavy cost burden to merchants for CNP transactions (ofwhatever type) is greatly aggravated in market sectors involving a highrelative volume of CNP transactions compared to CP transactions. Forexample, the vast majority (believed to exceed 90%) of airlinesreservations are made using CNP transactions. This means that thevarious airlines pay many millions of dollars out in elevatedinterchange fees as a result of CNP transactions. Similar burdens areshouldered by mail order companies, Internet-based companies, and othercompanies transacting a large portion of their business without meetingthe customer at the time the transaction is undertaken. This is asignificant problem.

Other problems and drawbacks also exist.

SUMMARY OF THE INVENTION

An embodiment of the present invention comprises a system and method forconverting initial financial transactions into final financialtransactions entailing lower transaction lees or which are otherwisemore advantageous or efficient. According to one embodiment of theinvention, a card not present (CNP) transaction is conducted for aremote (e.g., physically remote insofar the card can not be handed overat that time) consumer buying goods/services. When the consumer laterarrives at a point of authentication (POA), the consumer is presentedwith an opportunity to have the CNP transaction effectively converted toa card present (CP) transaction using the same card instrument or adifferent card instrument. The merchant benefits because the transactionfees are less for the CP transaction compared to the CNP transaction.Additionally, there may be other benefits to the merchant, such as therebeing a lower risk of repudiation or a rejection of the charge. Theconsumer may benefit from rewards/rebates or other inducements providedin exchange for authorizing the subsequent transaction. The transactionprocessor may benefit from the increased efficiency and reduced risk ofa card present transaction.

One preferred embodiment implements the invention in the airlinesindustry, wherein tickets ordered over the phone or on-line using afirst CNP transaction are converted to a CP transaction upon theconsumer swiping his/her card (which could be a credit card, a frequentflyer card, or other card carrying readable identification of theconsumer) at an airport kiosk card reader device or at the airportcheck-in counter. Notably, airport kiosk devices are now widely deployedas security control mechanisms to authenticate the consumers in theautomated issuance of boarding passes.

Accordingly, it is one object of the present invention to overcome oneor more of the aforementioned and other limitations of existing systemsand methods for payment processing.

It is another object or the invention to provide a system and method forreducing transaction fee costs for merchants accepting card instrumentsfor payment.

It is another object of the invention to provide a system and method forconverting higher cost CNP transactions to lower cost CP transactions.

It is another object of the invention to provide a system and method forincentivizing consumers to consent to converting higher cost cardinstrument transactions to lower cost card instrument transactions.

The accompanying drawings are included to provide a furtherunderstanding of the invention and are incorporated in and constitutepart of this specification, illustrate several embodiments of theinvention and, together with the description, serve to explain theprinciples of the invention. It will become apparent from the drawingsand detailed description that other objects, advantages and benefits ofthe invention also exist.

Additional features and advantages of the invention will be set forth inthe description that follows, and in part will be apparent from thedescription, or may be learned by practice of the invention. Theobjectives and other advantages of the invention will be realized andattained by the system and methods, particularly pointed out in thewritten description and claims hereof as well as the appended drawings.

BRIEF DESCRIPTION OF THE DRAWINGS

The purpose and advantages of the present invention will be apparent tothose of skill in the art from the following detailed description inconjunction with the appended drawings in which like referencecharacters are used to indicate like elements, and in which:

FIG. 1 is a block diagram of a card processing system for converting aninitial card transaction to a final card transaction according to anembodiment of the invention.

FIG. 2 is a flow chart of a method for converting an initial CNPtransaction to a CP transaction according to an embodiment of theinvention.

FIG. 3 is a block diagram of several alternative approaches forconverting a CNP transaction to a CP transaction according to yet otherembodiments of the invention.

FIG. 4 is a flow diagram of a method for converting a CNP transaction toa CP transaction at an airport according to an embodiment of theinvention.

FIG. 5 is a flow diagram of a method for converting an initialtransaction type to a final transaction type according to yet anotherembodiment of the invention.

DETAILED DESCRIPTION OF THE INVENTION

FIG. 1 is a block diagram of a card processing system for converting aninitial card transaction to a final card transaction according to anembodiment of the invention. Consumer 10 is a consumer (intended toencompass commercial buyers) purchasing goods or services. Consumer 10may be a person initiating such purchases over the phone (home phone,car phone, or cell phone), through the mail, or over a computing device(personal computer, laptop, Palm™ type device, personal data assistant|PDA|, Personal Communication Service [PCS] device, etc.). Thus,consumer 10 may be communicating with merchant 20 over a telephonicnetwork, the mail system, or a computer network such as the Internet orother public or private computer network.

Consumer 10 may be communicating with merchant 20 by interfacing with alive agent, a virtual agent, a Web site or other computer networkpresence, a interactive voice response (IVR) unit, a voice response unit(VRU), or any other suitable mechanism for consumer 10 to communicatewith a remote merchant 20 in order to purchase goods or services in aninitial transaction. For such initial transaction, consumer 10 is aconsumer remotely located from merchant 20. For a later transactionrelating to the conversion of the initial transaction to a finaltransaction, consumer 10 will be proximate to merchant 20, such as at abranch, store, or other locale or physical presence of merchant 20representing a point of authentication (POA) where a second card paymentinstrument can be presented.

Merchant 20 is a merchant which receives orders or requests forgoods/services and accepts card payment instruments for payment.Merchant 20 may comprise a live agent, virtual agent, Web site/othersite, VRU, IVR. etc. as described above. Merchant 20 may includeservers, databases, workstations, and appropriate software, forpreparing and submitting for processing a first transaction using afirst card payment instrument for a remote consumer 10. As describedfurther in subsequent diagrams, the first card payment instrumenttransaction may be processed as a so-called card not present (CNP)transaction. Preparation and submission of the first transaction may becarried out using any suitable device, including a computer/workstationwhich submits such transactions automatically or based on an agent'sinput, a point-of-sale (POS) type device, and the like.

Merchant 20 is also adapted to present opportunities to the consumer foreffectively converting a first card payment instrument transaction to amore favorable second card payment instrument transaction. As describedfurther below, the second card payment transaction may be a so-calledcard present (CP) transaction when the card is physically presented byconsumer 10 at a point of authentication (POA) where the card can beswiped or otherwise read by a card reader. PUS type device, and/orotherwise be made physically available for inspection. The PUS mayinclude a card reader for reading magnetically-encoded cards, an RFIDcard reader for reading RFID-type cards/fobs, or other type of cardreader device for reading information from a card (or fob or otherportable device) that is representative of a card instrument. The secondcard payment instrument can be the same or a different card paymentinstrument from the first card payment instrument. Preparation andsubmission of the second transaction may be carried out using anysuitable device, including a computer/workstation which submits suchtransactions automatically or based on an agent's input, a point-of-sale(POS) type device, and the like.

Accordingly, merchant 20 may include a presentation device, such as adisplay, monitor, screen, or the like, for presenting an offer toconsumer 10 to convert a first card payment instrument transaction to amore favorable second card payment instrument transaction. Thepresentation may include video and/or audio information. Thepresentation can be made in various fashions. For example, thepresentation can be a purely graphical presentation made on aspecialized terminal maintained by the merchant, such as a kiosk deviceor other dedicated terminal. The presentation can be made on a suitablyprogrammed general purpose computer terminal that is connected to theInternet or like public network, or even a private network, wherein thepresentation can be made as a so-called web page or similar page.

The presentation can be made on a display (e.g., page) that is dedicatedto the presentation, or can be integrated onto a page that includesother information. For example, following the consumer swiping his/hercard, a page may be presented that states: “Your reservation for a Ford®Taurus™ for three (3) days from Oct. 26-Oct. 28, 2004 is confirmed andyour car is in Lot B, Spot 125. Elsewhere, the page may also provide anoffer for converting the initial transaction as per the presentinvention: “If you will agree to allow us convert the original creditcard transaction for this reservation into a transaction for the sameamount on the same card or a different card, we can award you 500 drivermiles. If so, press ‘yes’ and swipe the card you wish to use.”

Of course, the presentation may be made on its own dedicated display orpage.

Other variations are possible. For example, the presentation can be madeas a so-called banner ad or pop-up ad.

In yet another variation of the invention, the presentation may be madeon a computing device that is not necessarily maintained by themerchant. For example, the presentation may be made on a computerequipped with a card reader device that is maintained by the consumer orsome other non-merchant individual or entity. For example, the consumermay initiate the initial CNP transaction by contacting the merchant overthe Internet using the consumer's computer. During the course of thatsession, the merchant's web site will ask “Is your computer equippedwith or do you have access to a card reader device.” The consumerresponds in the negative, and a CNP transaction is undertaken. Later,when the consumer visits another party with a computing device equippedwith a card reader, the consumer can access the merchant's web site,view a presentation with the offer, and swipe his/her card through thecard reader to initiate the conversion of the previous CNP transactionto a CP transaction.

Of course, the conversion offer can be articulated in many fashions,which may or may not reference “conversion” so long as the effect of theoffer, if accepted, is to carry out such a conversion. The offerpresented may include an offer of a reward or rebate as an inducementfor the consumer 10 to authorize or otherwise agree to the conversion.

Accordingly, merchant 20 may include a card reader device for reading asecond card payment instrument presented by the consumer 10 at the POA.The card reader device can be any device for reading cards, including acard reader, POS device, ATM reader, and the like. Alternatively,merchant 20 may include an agent who can type in or otherwise enter anaccount number as read from the card.

According to one embodiment, the card reader device and the presentationdevice for presenting the offer are preferably integrated together, suchas in a computer workstation or kiosk.

As can be readily appreciated, the various aspects of merchant 20 neednot be, and preferably are not, collocated. Just by way of example,merchant 20 may include some elements (a live agent, virtual agent, Website/other site, VRU, IVR, etc.) at a first site for receivingphone/mail/Internet orders corresponding to the first card paymenttransaction (e.g. for a CNP type transaction), whereas elements at a POAfor initiating the transaction conversion corresponding to the secondcard payment transaction (e.g., for a CP type transaction) are locatedat a second site at an airport, retail outlet, or other POA).

It is to be understood that as discussed herein the term “conversion” isto be broadly construed to cover any techniques for effectivelyconverting, transforming, translating, or modifying a first financialtransaction into a second Financial transaction. Therefore, conversionis intended to include canceling or reversing the first transactionfollowed by submitting the second transaction, converting a“provisional” (discussed further below) first transaction to a finaltransaction, and any other approach for effectively negating,nullifying, ignoring, removing, or modifying the first transaction (oraspects or portions of the first transaction, such as its transactionfee) and implementing the desired second transaction (which may be anentirely new transaction, which may be a modified first transaction,which may be a converted first transaction, etc.). Converting the firsttransaction, as described herein, could be effectuated by issuing arebate or credit against the transaction fees that are charged againstthe first transaction, as discussed below for FIG. 4.

Issuer bank 60 is a bank or other financial institution which is theissuer of one or more card payment instruments held by consumer 10.Issuer bank 60 and consumer 10 can communicate in various fashions,including by phone (live agent, virtual agent, IVR/VRU),computer/PCS/PDA (Internet or other networked connection, public orprivate), mail, and so forth. Cards issued to consumer 10 may includeany of a variety of cards, including a credit card (general use orprivate label), debit card, check card, bank card, ATM card, storedvalue card, or other card, as reflected at 70 of FIG. 1. Some cards maynot be issued by a bank per se, such as certain stored value cards orprivate label cards, in which case it is understood that issuer bank 60encompasses whatever institution or entity that issued the card.

Typically, the issuer (or an agent acting on its behalf) will also bethe entity which receives and approves/declines various transactionsagainst the card discussed herein, such as charges, debits, funds holds,transfers, balance/limit/funds available checks, and the like. Forsimplicity, FIG. 1 shows a single issuer bank 60 as representing theentity that issues the card and which processes transactions against thecard, although it is to be understood that separate entities couldeasily carry out those operations.

Merchant bank 50 is a merchant bank or sponsoring bank which maintains amerchant account on behalf of merchant 20, as well understood in thisfield. While FIG. 1 illustrates the typical case for purposes ofclarity, it is to be understood that merchant bank 50 does notnecessarily have to be a banking/financial institution separate frommerchant 20. Some large merchants 20 could establish and maintain theirown financial accounts.

Acquirer/transaction processor 30 is a transaction processor forreceiving and routing financial transactions on behalf of merchant 20.Just by way of a nonlimiting example, acquirer/transaction processor 30may route credit transactions through the credit networks (e.g., VISA®or MasterCard® interchanges), bank transactions through regionalnetworks (e.g., EFT or ATM networks), stored value transactions throughtheir appropriate communication channels, and so forth. According to theinvention, there may be one or more than one acquirer/transactionprocessor 30, as needed. In some cases, certain large merchants 20 maynot need the services of a separate acquirer/transaction processor 30.For some transactions, such as a stored value transaction for a storedvalue processing system maintained by the merchant 20, routing andprocessing may be carried out using infrastructure internal to merchant20.

Interchange/regional network 40 represents any interchanges, regionalnetworks, or other networks through which transactions are routed.Transactions may include any transactions appropriate for the cardinstrument, and used for implementing the invention, including anyauthorization transaction, deposit transaction, reversal/cancellationtransaction, provisional transaction, provisional conversiontransaction, balance/limit/funds available checks, and so forth.

FIG. 2 is a flow chart of a method for converting an initial CNPtransaction to a CP transaction according to an embodiment of theinvention. The method starts at 100, and a remote consumer contacts amerchant at 105 in order to purchase goods or services. For example, theconsumer's personal computer may contact the merchant at the merchant'spoint-of-presence on the Internet.

At 110, an initial transaction, such as a CNP transaction, is conductedfor selected items (goods or services, e.g., an airlines ticket) using afirst card payment instrument or using accounts/cards already on filewith the merchant. For example, the merchant may submit a CNPtransaction based on the consumer's credit card account to be processedthrough a transaction processor/interchange to the consumer's issuingbank.

Where the initial transaction is a CNP transaction, it may comprise anyof the various CNP transactions that may be supported for the first cardpayment instrument. For example, if the first card payment instrument isa general purpose credit card, the initial transaction could be aconventional CNP transaction where an account number and expiration dateis provided. The initial transaction could be an improved CNPtransaction where other security-enhancing information is included, suchas information from the back of the card. Such improved CNP transactionsare well known in the art, such as, for example, the VISA® CVV (CardVerification Value) based CNP transaction or the MasterCard® CVC (CardVerification Code) based CNP transaction. Yet other types of CNPtransactions may be used for the first transaction, such as transactionswhere the address of record of the cardholder is included as yet anothersecurity enhancement for an otherwise CNP transaction.

At 115, the consumer arrives at a POA of the merchant, and at 120 theconsumer presents or makes available for inspection a second cardpayment instrument. According to the invention, the second card paymentinstrument may be the same as or different from the first card paymentinstrument. For example, the consumer may arrive at a merchant branchand present the same credit card as previously used for a CNPtransaction, or the consumer may present a completely different card. Ineither case, the card is physically present.

At 125, the initial CNP transaction is converted to a CP transaction.The conversion may follow an offer presented to the consumer for theconversion and the consumer's authorization or acceptance of the offer.The offer may include a rebate, reward, or other incentive to beprovided to the consumer in exchange for accepting the offer. Forexample, the oiler may be provided via a computer screen or displaywhich indicates that the consumer's agreement to convert the transactionwill result in 1000 frequent flyer miles to the consumer's frequentflyer account; 5% off on the next purchase with that merchant; 1% off onthe existing purchase; and so forth. The variations in the incentivethat may be provided to the consumer are endless, but the common themeis that such a consumer incentive may be employed in order to share theefficiency benefits that accrue when lower cost, more secure,transactions are used to replace the initial transaction.

The conversion of the CNP transaction to the CP transaction at 125 canbe implemented in numerous fashions, examples of which are provided forFIG. 4 below. It should be appreciated that the examples provided inFIG. 4 are merely exemplary, and the scope and spirit of the inventionclearly encompasses other variations for converting first transactionsto more efficient second transactions as broadly described herein.

At 130, the optional rebate/reward/incentive is provided to theconsumer. For example, the rebate/reward/incentive could includefrequent flyer miles, rental car miles, a discount, an upgrade, or anyother incentive. The method ends at 135.

FIG. 3 is a block diagram of several alternative approaches 125 forconverting a CNP transaction to a CP transaction according to yet otherembodiments of the invention. According to one approach, at 205 thefirst CNP transaction on the first card payment instrument is canceledor otherwise reversed, and at 210 a second CP transaction on the firstcard payment instrument is conducted.

Just by way of example, the first transaction may have been submitted ona credit card account 1234 4321 1342 4231 as a CNP transaction subjectto a 1.9% transaction lee. If the purchase was for a $1000 airlineticket, the merchant (airlines) would pay a $19 transaction fee. By ineffect canceling or reversing or revising that transaction (as is wellunderstood in the art) and submitting a second transaction on that samecredit card account 1234 4321 1342 4231 as a CP transaction subject to a1.4% transaction fee, the merchant is charged only a $14 transactionfee. The reduction in the transaction lee, more than 25%, is asignificant reduction in cost that benefits the merchant and which canbe shared with others, including the consumer purchaser.

In another approach beginning at 215, the first transaction wasconducted as a so-called “provisional CNP transaction.” A provisionalCNP transaction is a CNP transaction which is understood or intended tobe subject to a subsequent conversion upon presentment of the card at aPOA. For example, depending on the implementation, a provisional CNPtransaction might provide the merchant 20 with a certain period of timefor converting the provisional CNP transaction to a CP transaction, suchas 7 days, 14 days, etc. Or the provisional transaction could beunderstood as being subject to conversion prior to some event, such asprior to the consumer checking in/boarding an aircraft or takingdelivery of goods or services. According to one approach, if notconverted, the provisional CNP transaction would stand as a CNPtransaction with applicable transaction fee rates applied thereto.According to another approach, additional fees or costs may be imposedwhen the conversion is not completed. These additional fees or costs areimposed on the merchant, although, some portion or all could be passedon to the consumer in order to encourage the consumer to carry out theacts needed for conversion. Other approaches to a provisional CNPtransaction could easily be implemented without departing from thespirit and scope of the present invention. With that background, at 215the provisional CNP transaction is converted and at 220 the result is aCP transaction for the same card.

According to one approach, a provisional CNP transaction could beimplemented as a so-called “Card Not Yet Present” (CNYP) transaction.Under such a CNYP transaction, at the time of purchase or reservation itwould be understood that the consumer would be able to present the cardprior to completion of the transaction. This would avoid the need forcanceling or reinitiating the initial transaction. This approach may beparticularly beneficial for transactions where the consumer mustultimately be present to complete the transaction, e.g., to pick up theticket and board the airplane, to check in at the hotel, to pick up therental car, and so forth.

According to yet another approach, a so-called “Psuedo Card HolderPresent” (PCHP) transaction would represent a middle ground between a CPand a typical CNP transaction. For a PCHP transaction, like a CNPtransaction, the merchant is not initially presented with a physicalcard because the consumer is remotely located from the merchant.However, a secondary authentication mechanism could be used to provethat the cardholder corresponds to the consumer who is remotelycontacting the merchant for the transaction. For example, any of thevarious sorts of personal identification information often used forsecurity purposes could be employed, such as mother's maiden name, a PINor other personal code, an alias, a phone number (e.g. through the useof ANI), social security number, and the like. Other means forauthenticating the consumer could be used, such as a cookie stored onthe person's computer, mobile phone browser, key fob, MD tag, etc.Additionally, where the merchant has an affinity program, such as afrequent flyer program, the merchant could link the use the affinityprogram's card as proof that the cardholder was present for a PCHPtransaction.

Such a PCHP transaction might be afforded a lower transaction fee by theprocessing networks. Such as PCHP transaction might be subject to theconsumer later presenting the card at a POA.

Another approach to transaction conversion is to cancel/reverse the CNPtransaction for a first card payment instrument at 225, and to conduct aCP transaction on a different second card payment instrument at 230, asdepicted in FIG. 3. Canceling/reversing the first CNP transaction isintended to be understand as encompassing any formal mechanismrecognized by the transaction network for canceling/reversing atransaction, as well as any other fashion to effectively accomplish theresult of canceling/reversing the transaction. The second card paymentinstrument may include any of the cards discussed in conjunction withFIG. 1. It is to be understood, as well, that a CP transaction isintended to include transactions for cards capable of both CP and CNPtransactions (e.g., general use credit cards), as well as cards capableonly of CP type transactions (e.g., on-line PIN type debit cards).

Yet another approach for effectively converting a CNP transaction to aCP transaction is depicted in FIG. 3 at blocks 235-240. At 235, aninitial CNP transaction is undertaken. At 240, once the cardholder haspresented the card instrument at a POA, a rebate on the CNP transactionfee is provided back to the merchant. Therefore, the initial CNPtransaction is not actually reversed or negated; rather, the merchant ispaid a rebate on the transaction fee that was to be deducted (or alreadyhas been deducted) from the net payment to the merchant. Alternatively,if the merchant had not yet received a net payment reflecting theelevated CNP transaction fee deduction, the merchant can simply beprovided a net payment reflecting a transaction fee with the rebateapplied thereto. The rebate discussed above could be a full rebate thateffectively makes up for the difference between a CNP transaction feeand a CP transaction fee, or could be something less than thedifference. In fact, the value of the rebate could actually exceed thedifference in order to encourage the merchant to begin practicing thetransaction conversion process described herein.

The person of ordinary skill in the field will readily appreciate thatthe issuance of a rebate or credit to the merchant in order toeffectively convert the CNP transaction can be implemented in variousfashions. The rebate could be issued on a per-transaction basis or itcould be issued on a volume basis. The rebate could be issued based onthe merchant satisfying certain thresholds. For example, the rebatecould be issued based on the merchant having some percent of the initialCNP transactions (e.g., 25% of all CPN transactions) validated by thecardholder later presenting the card at a POA.

Yet another approach for effectively converting a CNP transaction to aCP transaction is depicted in FIG. 3 at blocks 245-250. At 245, aninitial CNP transaction is undertaken; however, this CNP transaction isundertaken with a fee that more closely approximates (or equates) thetransaction fee for a CP transaction. However, if the merchant fails toauthenticate the card instrument at a POA, as discussed elsewhereherein, the merchant may be subjected to a penalty or surcharge toaccount for the higher risk.

In yet another variation (not shown), the approaches for blocks 235-240and 245-250 could effectively be combined, i.e., following the initialCNP transaction, the merchant which has the consumer present the card ata POA will receive a rebate or reward, whereas the merchant who does notsuccessfully provide for card presentment will suffer apenalty/surcharge.

FIG. 4 is a flow diagram of a method for converting a CNP transaction toa CP transaction at an airport according to another embodiment of theinvention. Preferably, the POA for initiating the conversion takes placeat, an airport kiosk. These airport kiosk devices are now widelydeployed as security control mechanisms to authenticate the consumers inthe automated issuance of boarding passes.

The method starts at 300, and an airlines is contacted at 305. A CNPtransaction for a first card payment instrument is conducted at 310 forpurchasing tickets or acquiring other goods/services from the airlines.Information of the first card payment instrument may be provided by theconsumer at that time, or may be retrieved by the airlines frompreviously stored data files. For example, the consumer may providehis/her credit card information over a secure link on the Internet tothe airlines' web site, over the phone to a live agent, or over thephone to an IVR/VRU device.

At 315, the consumer arrives at the airport (e.g., a gate or terminal orcheck-in location), and at 340 a second card payment instrument isswiped or read at a kiosk or other card reader device. The consumer ispresented with an option (offer) to convert the initial CNP transactionto a CP transaction at 345. At 350, rebates/rewards or other incentivesmay be offered as an incentive to accepting the offer. At 355 theinitial CNP transaction on the first card payment instrument isconverted to a CP transaction on the second card payment instrument. Thefirst and second card payment instruments may be the same or different.The method ends at 360.

In FIG. 4, steps 315 through 355 can be implemented in various fashionseasily comprehended by the person of ordinary skill in this field andwithin the spirit and scope of the invention. For example, the merchant(here, an airline) may provide a presentation device and a card readerdevice. Preferably, the presentation device and card reader device areintegrated, such as in a kiosk or similar consumer friendly terminal.The card reader device allows the consumer to swipe a card which can beread in order to identify the cardholder. Based on the identity of thecardholder, a database can be read to identify if the cardholder made aninitial purchase based on a CNP type transaction. If so, thepresentation device can present the offer that the initial CNP typetransaction be converted to another transaction. The development ofcomputer code to search a database of purchase transactions and togenerate display screens with offers is well understood and well withinthe skill of the ordinary artisan.

Several examples are helpful in appreciating the breadth in which theinvention can be implemented. For example, assume the initialtransaction was for a $1000 airline ticket made as a CNP transaction ona 1234 4321 1342 4231 VISA credit card account subject to a 1.9% baserate transaction Ice. The consumer arrives at the airport check-in kioskand swipes a card through the card reader. Preferably, the consumerswipes that same 1234 4321 1342 4231 VISA credit card, however,virtually any card instrument that has encoded information of thepurchaser's identity can be used in order to look up the initialtransaction (e.g., some other credit card, a bank card, etc.).

Based on the card that is swiped by the consumer, the card readerprocessing apparatus causes a search of the database to be conductedwhich indicates that the initial purchase was a CNP purchase. As aresult, the display apparatus may present to the consumer one or moreoptions for converting that initial transaction, such as:

-   -   “If you authorize us to re-run the transaction on your 1234 4321        1342 4231 VISA credit card for the same amount of $1000, we can        award you 1000 frequent flyer miles on your frequent flyer        account. Please press ‘yes’ and swipe your 1234 4321 1342 4231        VISA credit card.”    -   “If you authorize us to cancel the transaction on your 1234 4321        1342 4231 VISA credit card for $1000 and run that transaction        for the same amount on your ATM/debit card, we can award you        1500 frequent flyer miles on your frequent flyer account. Please        press ‘yes’ and swipe your ATM/debit card.”    -   “If you authorize us to cancel the transaction on your 1234 4321        1342 4231 VISA credit card for $1000 and run that transaction        for the same amount on your stored value card, we can award you        1500 Frequent Flyer miles on your Frequent Flyer account. Please        press ‘yes’ and swipe your stored value card.”

The above scenario represents just an example of how the invention mightbe implemented, and it is to be understood that other variations arewithin the scope and spirit of the invention. For example, differenttypes of incentives could be offered to the consumer, or no particularincentive may be offered at all. According to yet another approach, theincentives provided to consumer can be adjusted based on thedesirability of the transactions to the merchant. Just by way ofexample, suppose that the merchant's order of preference fortransactions is (1) ATB/debit card transactions, (2) credit cardtransactions and (3) stored value card transactions. Accordingly, themerchant could provide the greatest level of incentives 1 hr (1), alesser incentive for (2), and yet a further lesser incentive for (3).The merchant's preference may be based on the cost of the transactions(thus encourage the transactions with lower transaction fees), based onsecurity considerations (thus encourage transactions viewed as mostsecure), or on any other consideration important to the merchant.

FIG. 5 is a flow diagram of a method for Converting an initialtransaction to a final transaction according to yet another embodimentof the invention. The method starts at 500, and a consumer interfaceswith a merchant at 505. An initial transaction is conducted at 510. Theinitial transaction may be a CNP or CP transaction using a first cardpayment instrument. At 515, the consumer is presented with anopportunity (offer) to convert the initial transaction to a finaltransaction. At 520, an offer for a rebate/reward/incentive may beprovided. At 525 the initial transaction is converted into the finaltransaction.

According to FIG. 5, the initial transaction and final transaction maybe different types of transactions for the same card payment instrument(e.g., a first CNP transaction and a second CP transaction for the samecard); different types of transactions on different card paymentinstruments (e.g., a first CNP transaction on a first card and a secondCP transaction for a second, different, card); similar or identicaltypes of transactions on different card payment instruments (e.g., afirst CNP transaction on a first card and a second CP transaction for asecond, different, card; a first CP or CNP transaction on a first cardand a second CP transaction for a second, different, card, etc.).Preferably, the final transaction is one which is less costly orotherwise more advantageous to one or more parties illustrated inFIG. 1. For example, merchants may prefer bank card type (e.g., ATMcard) transactions over credit transactions. Therefore, the consumer maybe induced to convert a first credit card transaction (CP or CNP) to asecond transaction on the bank card because of the reduced transactionlees on the latter.

According to yet another embodiment, the final transaction need not be acard instrument based transaction. For example, the final transactioncould be a cash transaction, check transaction, RFID transaction, orother type of transaction which is more advantageous to the merchantand/or consumer than the initial transaction.

Other embodiments and uses of this invention will be apparent to thosehaving ordinary skill in the art upon consideration of the specificationand practice of the invention disclosed herein. The specification andexamples given should be considered exemplary only, and it iscontemplated that the appended claims will cover any other suchembodiments or modifications as fall within the true scope of theinvention.

1. A computer implemented method for converting an initial financialtransaction to a final financial transaction, the computer comprising aprocessor and a memory, the method comprising: receiving at an airlinesa contact from a remote consumer; conducting a card not present (CNP)transaction for a first card instrument with the airlines for services;providing a card terminal reader at a point of authentication (POA)device at the airlines for enabling the consumer to swipe a second cardinstrument; receiving an authorization from the consumer at the POAdevice for a conversion of the CNP transaction on the first cardinstrument to a card present (CP) transaction on the second cardinstrument; and the processor converting the CNP transaction on thefirst card instrument to a CP transaction on the second card instrument.2. The computer implemented method of claim 1, wherein the card terminalreader comprises a kiosk at the airport.
 3. The computer implementedmethod of claim 1, further comprising providing a reward or rebate as aresult of authorizing the conversion.
 4. The computer implemented methodof claim 3, wherein the reward or rebate comprises frequent flyer miles.5. The computer implemented method of claim 1, wherein the reward orrebate varies depending on a type of the second card instrument.
 6. Thecomputer implemented method of claim 1, wherein the first cardinstrument and second card instrument are the same.
 7. A computerimplemented method for converting an initial financial transaction to afinal financial transaction, the computer comprising a processor and amemory, the method comprising: receiving at an airlines a contact from aremote consumer, wherein the contact comprises a telephone call or anon-line order; conducting a card not present (CNP) transaction for afirst card instrument with the airlines for services, wherein theservices comprises ordering plane tickets; providing a card terminalreader at a point of authentication (POA) device at the airlines forenabling the consumer to swipe a second card instrument, wherein thecard terminal reader comprises a kiosk at the airport; receiving anauthorization from the consumer at the POA device for a conversion ofthe CNP transaction on the first card instrument to a card present (CP)transaction on the second card instrument; providing a reward or rebateas a result of authorizing the conversion, wherein the reward or rebatecomprises frequent flyer miles and is based on a type of the second cardinstrument; and the processor converting the CNP transaction on thefirst card instrument to a CP transaction on the second card instrument,wherein the first card instrument and second card instrument areselected from a group consisting of a credit card, bank card and storedvalue card.